Market Perception of Goodwill: Some Empirical Evidence

Accounting and reporting for goodwill has been on the agenda of the Financial Accounting Standards Board, the International Accounting Standards Committee, the UK's Accounting Standards Board, and the US Congress. Goodwill has also been the subject of Securities Exchange Commission rulings dire...

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Bibliographic Details
Published in:Accounting and business research 1995-12, Vol.26 (1), p.69-81
Main Authors: McCarthy, Mark G., Schneider, Douglas K.
Format: Article
Language:English
Subjects:
Accounting
Book value
Economic models
Financial reporting
Goodwill
Hypotheses
Regression analysis
Shareholders equity
Studies
U.S.A
United Kingdom
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Summary:Accounting and reporting for goodwill has been on the agenda of the Financial Accounting Standards Board, the International Accounting Standards Committee, the UK's Accounting Standards Board, and the US Congress. Goodwill has also been the subject of Securities Exchange Commission rulings directed at specific companies. The attention directed towards goodwill would suggest that it is a material asset for a large number of firms. This article analyses the market perception of goodwill as an asset in the determination of the firm's valuation. Also explored is whether the market values goodwill to the same degree as it values other assets. The results of this study found that the market perceives goodwill as an asset and incorporates the information in the valuation of a firm. The findings of this study could be of importance to those involved in and affected by standard-setting deliberations involving goodwill.
ISSN:0001-4788
2159-4260
DOI:10.1080/00014788.1995.9729499